Tuesday, August 05, 2008

In the national healthcare debate during the Democratic primary this spring, a key difference between Barack Obama and Hillary Clinton's health plans emerged. She favored requiring citizens to purchase health insurance themselves, providing penalties if they did not comply. Obama said her solution was unworkable, that some people didn't have health insurance because they could not pay and it would do no good to punish them.

The same dilemma Obama described exists today en masse on Texas roadways. Texas law requires drivers to have insurance, but in practice, for a variety of reasons, about 25% of drivers don't have any according to a recent test by the Department of Public Safety in Austin. Reported AP last week ("Sizable number of Texas drivers lack insurance," July 29):

A 60-day pilot project testing the new TexasSure program, which allows law enforcement personnel via computer to verify coverage status when they stop a motorist, focused on Travis County. During the test which is expected to end soon, Texas Department of Public Safety troopers stopped and ticketed uninsured drivers.

So far, 25.5 percent of 5,012 drivers stopped in Travis County and small portions of nearby Williamson and Hays counties since June 2, did not have auto insurance.

"The numbers show that Texas has an even larger number of uninsured drivers than we had realized," said Mark Hanna, spokesman for the Insurance Council of Texas, in a story Tuesday in the online editions of the Houston Chronicle and the San Antonio Express-News.

The Council has been monitoring the state's new auto insurance verification program.

"Troopers tell us that some areas of the state may have more than half of their drivers uninsured, and that's scary news for everyone else on our roadways," Hanna said.

This spring, the minimum amount of liability insurance Texas drivers are required to have, increased for the first time in 22 years. Hanna said he didn't think the higher requirement was a factor in the lack of coverage because the effect on premiums was "minimal."

During the pilot project, drivers who said they were insured but weren't carrying proof of insurance weren't issued citations if troopers, using the new technology, validated their insurance coverage.

DPS plans to issue a report of its findings when the pilot is completed.

A portion of the vehicle registration fee is paying for a $7 million contract with HDI solutions Inc.

Those ticketed for no insurance who are truly impoverished quickly slide down a slippery slope from which it can be nearly impossible to extract oneself. They face the immediate impound of the car they likely need to get to work, with an expensive impound fee to get it back. Then, of course, the no-insurance ticket is expensive - typically several hundred dollars - and it also triggers a separate fee owed to DPS of $250 per year for THREE Years (ironically called the Driver Responsibility Fee). If you don't pay, you can't renew your driver license. A traffic stop while driving without a license, of course, also results in a huge ticket and another fat DPS fee.

The result of these expensive and draconian measures has been utterly predictable: Today more than 10% of adult Texans have an outstanding arrest warrant, most of them for failing to pay tickets or the misnamed DPS Driver Responsibility Fee. This "solution" is only going to make matters worse--more impoverished people getting more tickets and more fees they can't pay while officers spend more time impounding cars and getting these otherwise peaceful citizens off the roads while spending even less time making the public safe from actual criminals.

My own preferred solution to the crisis of uninsured drivers is as simple as it is unlikely to pass in Texas anytime soon: Use the gas tax to implement pay at the pump insurance for minimum liability so that every driver becomes automatically covered via no-fault insurance on terms more closely regulated by the state. As an added bonus, since companies would all be paid the same for every driver, they would be forced to compete on quality of service instead of striated pricing schemes.

Obama was right that Hillary Clinton's forced insurance plan wouldn't have worked had it been implemented. How do we know? We've already witnessed the identical failure in the auto insurance arena.

38 comments:

"Use the gas tax to implement pay at the pump insurance for minimum liability..." I'm not sure I understand this. Do you mean, use revenue from the gas tax to pay, through the government, for everyone to have the minimum level of insurance? This implementation(and forgive me if I've misunderstood) seems like it would subject to the same perverse incentives that have made Medicare such a bottomless sink for money. Such a program would inevitably become yet other bloated government contract, highly profitable for a small group, but a drain on everyone else. Could you please clarify what you mean for me? I completely agree with you though, almost anything would be far better than the current punitive approach to enforcing insurance converage. (Aside; I love the blog, and read it every day. Keep up the great work!)

How many people don't have insurance because their licenses were suspended, revoked, or expired, and they shouldn't be driving anyway?

"otherwise peaceful citizens off the roads while spending even less time making the public safe from actual criminals"

Aren't you assuming that the only reason people are driving illegally is for financial reasons, when many of them may have had DWI citations?

Surely poverty plays a role in this problem, but you have to wonder how many of the people without insurance aren't supposed to be driving in the first place because of past citations. Is that specific information provided?

Also, if a person has been in collisions which were their fault, or had their rates raised because of their driving history, even if they're not impoverished, they could have made their own insurance rates too high to afford. This is a complex issue. It's simplistic to blame the state entirely for a problem that is probably partially caused by some drivers themselves.

With the large budget shortfalls in Dallas County,about $34 million,this looks more like a method to enhance revenues as opposed to punishment for the lack of insurance.One huge problem is allowing insurance companies to tie their premiums to credit ratings.So,the very poor pay more than those with higher incomes.I sometimes pass through the less fortunate section of Dallas and often see the Sheriff cars and wreckers hauling off car after car.The Texas Insurance Commisioner needs to get some legislation passed to do away with the credit score being a factor in car insurance premiums.Perhaps this program is designed to also help the Pay day loan companies that charge interest rates that are usery,as far as I can tell.No insurance,no money,no car so it's going to force people of limited means to rely on tax supported government programs.In turn,it puts more stress budgets that are already falling short due to a slow economy with unemployment and cost of living steadily rising.

I work in Property and Casualty insurance (primarily auto and home) and agree with the need to get rid of credit scoring. Insurance companies (including my employer)claim that credit scoring is an accurate predictor of losses, but that is simply not true. My credit is crappy (result of being in commissioned sales for the last 5 years). But I haven't had a ticket in over a decade, or an at fault accident ever.

However, my mother in law cannot drive to save her life (2 at fault accidents, and a stop sign ticket in the last 18 months). Her rates are STILL lower than mine, because she has stellar credit.

It doesn't make sense to not base the rate on DRIVING history. Every insurance company in the nation has access to CLUE (Comprehensive Loss Underwriting Exchange) reports and Motor Vehicle reports. If they cannot accurately predict based on those two items, maybe they should get out of the business.

Christopher, here's the idea. Insurance is premised on pooling risk but 1 in 4 drivers isn't in the pool. So right now we have perverse incentives that amount to a bloated government subsidy to insurance companies that isn't solving the problem.

The idea behind no fault insurance via a gas tax is that everyone by definition has to pay if they're driving. It 100% ends the criminal enforcement aspect of the problem and allows all the resources - traffic enforcement, courts, jails, etc. - currently spent on enforcement to go toward more addressing more serious and less easily soluble crimes.

Eric's concern that driving history be taken into account is an actuarial concern for insurance companies, not a public policy mandate for solving the 25% uninsured crisis.

Pursuant to their business model, insurance companies would be free to charge more for poor drivers seeking comprehensive coverage, but minimum liability (the part that's required by law and therefore subject to the Hillary Clinton conundrum) would cost the same for everybody as an extra fee at the gas pump.

The question becomes, would you rather actually solve the problem or punish perceived scofflaws? Clearly the Clinton-esque criminal enforcement strategy has utterly failed.

Anytime you're selling something that the government requires, you're business model is in trouble.

If an uninsured person has an accident, they suffer the financial consequence. In effect, they're self insured. The only part of insurance that is in the public interest is liability insurance to protect drivers from risk over which they have no control.

Why not sell insurance to rich folks to cover that - known as uninsured motorist coverage. Right now it is offered for medical costs but not for loss of property.

The solution would be to allow people that can afford it to buy coverage against uninsured motorists for property damage and provide universal coverage for medical expenses.

That way the poor could continue to be "self insured".Financial ruin provided by government currently adds insult to injury. - Pardon the pun!

One problem I have with the cited 25% figure is that I would not be surprised if those without insurance also tend to commit more driving infractions than a random sample of all drivers would produce. Unless I'm misunderstanding the program, the figures refer only to a population that has already been stopped for some other reason.

Soronel writes, "I would not be surprised if those without insurance also tend to commit more driving infractions than a random sample of all drivers would produce"

Of course, that's exactly why you want to ensure those folks have insurance, so if they damage someone else's property that person won't be left holding the bag.

It all boils down to, would you rather everyone be insured, or have somebody to blame? By expanding the insured pool that dramatically, my guess is per-person costs overall might even go down, though that's a hunch, not a calculation. Right now those costs are allocated in a much more haphazard and frequently harmful way as externalities, to use the economists' phrase, when uninsured drivers hit someone.

I've had uninusured/under insured motorist coverage forever, and I have made several claims against it in the 30+ years I have been driving. If the gas tax or "pay at the pump" insurance would do away with my uninsured/under insured motorist coverage premium that I already pay ... i'm all for it. Another idea I have heard knocked around for years is placing your insurance info on the electronic strip on your TDL, you run your TDL when you buy gas, if insurance isn't current that cost is added to your cost per gallon of gas. Not a fail safe (using other folks id's etc.) but an "outside of the box" idea.

My statement was more about what I felt to be a misleading title. Rather than showing that 1/4 of drivers lack insurance all that was shown is that 1/4 of Texas drivers that were stopped for some reason lack insurance.

Without further investigation I am not convinced the two sets are substantially the same.

I don't disagree with you often Grits, but this is one instance. I attended some of the hearings that led to the current law and came away thinking that some people simply don't need insurance. That's why they don't buy it. They have no assets to lose and their car isn't worth paying insurance on. I don't see any real net benefit to society by requiring such people to carry insurance.

The only people who benefit from the mandatory auto insurance scheme are wealthier people who like to have someone else's insurance to collect against, and insurance companies.

Drivers can already limit any risk they face by purchasing uninsured motorist coverage on their existing policies. So if you can take care of the problem yourself, why bother to set up an entire enforcement regime that attempts to force others - who have no other need for insurance - to waste money on insurance?

Soronel is exactly right. The likelihood of getting stopped, as far as I can tell from the pilot description, is not random: thus, only those who commit some sort of infraction are pulled over, which is probably related to the probability of not having insurance. All of the headlines citing the results of this pilot program are exceedingly misleading and should be qualified accordingly.

Also, by expanding the pool to include these high risk drivers (presumably, and you seem to endorse this assumption according to your response to Soronel), wouldn't this increase the riskiness of the risk pool, since this is not a random cross-section of responsible drivers? Won't this, then, boost the cost of insurance? Low risk drivers, from an actuarial perspective, subsidize higher risk drivers (same goes for health insurance), but by increasing the proportion of high risk drivers, this should push up costs for everyone, right?

Conversely, as the last poster glancingly suggests, might not having insurance reduce moral hazard, leading to less imprudent driving behavior?

Also, if uninsured drivers are such a threat, why are UM coverages so stunningly inexpensive?

It's always the same question. Should we force people to be insured? Should we enter this area of personal liberty of choosing the risk one wants to bear? If not, do we have mechanisms to force the guilty one to pay the damage? As a Toronto life insurance broker I believe in man's own responsibility, but it have to be backed by well working law system!Lorne

Anon at 10:41 stated that, "If you drive without insurance, you lose your car. Period. No second chances."

Sorry but that doesn't work either, even if the penalty/fine fits the violation.

What happens in jurisdictions where autos are seized is that those who can't afford insurance dump the safe car and buy junkers that, if seized, are a minor financial loss. So instead of driving a reasonably safe auto of newer vintage, they end up driving former "rent a wrecks" that are a hazard on the road by their very presence.

The reason we have insurance requirements for driving is because insurance companies wanted the government to force people to buy insurance.

The reason we have insurance requirements for mortgages is because mortgage companies wanted to stick homebuyers with their risks.

Think about how many freedoms we have that don't require insurance, and then try to justify forcing people to buy insurance.

Imagine if car insurance as as voluntary as health insurance. Those who could not pay would be uninsured. Those who could pay would pay a lot more for the services they enjoy, without putting a burden on the people who will never enjoy those services.

It would be better for yacht owners if every one of our 300 million people paid into yacht insurance, but it would really screw the people who can't afford boats.

I've been an insured driver all my adult life. My car got stolen in 1992 and was recovered. My insurer, Allstate, has still not paid the claim. So, actually, I was never really insured, they defrauded me, they're getting away with an ongoing criminal enterprise, and the justice system doesn't give a rat's ass.

So explain to me why the government has a right to require me to pay the insurance company to pretend to insure me while actually stealing from me, and how this is supposed to benefit the greater good.

Very interesting topic and comments. I find myself agreeing wholly or in part with every single poster.

This whole "crisis" looks like another Hegelian "problem, reaction, solution" scenario to me.

I really do not believe that our top government rulers want people to have their own vehicles and to drive about freely. I believe the plan is to control every aspact of our lives including where we live and where and how we are allowed to travel.

I have heard many many reports that the DPS does not ticket illegal aliens for driving without a license and not having insurance. I bet the sample of drivers in the study contained a fairly high percentage that did not even have valid Texas drivers license.

I think the DPS is crooked. I think insurance companies are more crooked and rip-off in nature than the average person has a clue about. The thought of the government contracting some insurance to get all those premiums paid at the pump, of course, stinks too. Haven't we all had enough of this fascist "public / private partnership" scam?

Our secret rulers are busting our economy and our drivers out right now. Our national borders have been deliberately obliterated by the policies of our governemnt, and that means the end of national sovereinty, and that means the end of our Constitution and the rule of law.

I am not in favor of people without car insurance coverage being incarcerated, however, I am highly amendable to the idea of incarcerating the top crooks in all public and private entities of Texas.

You can't compare health insurance and auto insurance, grits... health care should be a right, not a privilege (like driving). and you can't get health care in this country without insurance (a different, but still totally messed up issue)

At some point the idea of automobile liability insurance got turned upside down.

When the insurance companies first started selling automobile liability insurance the insurance was intended to protect the insured person from being required to pay, out of his own pocket, damages owed to an injured third party. Damages owed by the insured person to another party who was injured, physically or financially, by the insured person’s negligence under certain circumstances, contractually agreed to within the insurance contract, would be paid by the insurance company.

The insured person was wagering a certain sum (premium) that, within the time period covered by the insurance contract (policy), he was going to negligently injure a third party. The insurance company was wagering that he wouldn’t. And, both parties were hoping that the insured person wouldn’t need to rely upon the company to step up and pay, as a proxy, for the results of an act of negligence on the part of the insured person..

The liability insurance contract was never intended to protect a third party, and only people with something to lose needed the assurance of liability insurance coverage.

The only time a liability insurance company was required by contract to pay a dime to a third party was in circumstances where the insured party was actually LEGALLY financially LIABLE to the third party.

If it was determined that the third party was injured, physically or financially, though his own negligent actions occurring concurrently with the negligent actions of the insured person, there was no liability on the part of the insured person and the injured third party did not have a valid claim foe damages against the insured person. In this instance the liability insurance company would not pay the third party, even if the insured person may have felt morally obligated.

Sometime ago, I believe in the ‘60s, somebody came up with the bright idea that the purpose of liability insurance should be to protect the injured third party rather than to protect the owner of the insurance policy. Lawmakers jumped on the bandwagon. The Department of ?Public Safety? got into the mix. The supporters of the Nanny State got involved. Insurance premiums went out of sight. Dollar amount judgments soared.

Sometime ago, I believe in the ‘60s, somebody came up with the bright idea that the purpose of liability insurance should be to protect the injured third party rather than to protect the owner of the insurance policy.

Is it any wonder that this happened about the same time that the white people all moved out to the suburbs and the automobile changed from a luxury to a necessity?!? An automobile is no longer a luxury for the people who vote, pay the taxes, and keep the economy moving. Maybe this will change now that we have expensive gasoline and shiny new highrise condos being built in downtown.

Second: Rescind any State laws requiring insurance and let the drivers do it, or not, at their choice.

It's never going to be perfect, and distorting the market and enabling a huge state bureacracy only makes everything worse...and it still doesn't work.

We just drove 2600 miles to Ohio and back. We didn't see one accident. People generally drive with their own self-interest in mind.

I'm not sure that dropping the state drivers license requirement wouldn't be a bad idea. Folks used to drive without them- most state license bureacracies date from after WWII. We seemed to do well without them and are doing pretty well now. Just let the people go.

While I do like the idea of no fault insurance I have to ask some of the commentors this. Why do we have to assume that all uninsured drivers can't afford it?

Granted they're not rolling in the cash, but I have stopped many drivers with no insurance who make other choices with the money they have available. Choices like 20 inch rims, booze, I Phones, bling-bling, etc. For a lot of folks it's just about priorities, not responsibilities.

I fail to see how requiring drivers to have insurance is an unjust imposition. Anyone who drives without it deserves arrest. Texas has many laws and law enforcement practices I see as wrong, but this is not one of them.

Pay-at-the-pump shares the same problem as assigned-risk and no-fault insurance plans: it covers everybody, thus eliminating the ability of the marketplace to remove unsafe drivers from the road by refusing to cover them.

*Health* insurance that covers everybody may make sense, because it's probably not your fault if you're a high risk. But if you're a high risk *driver*, it *is* your fault and you should not be driving.

JDG, you're 100% wrong about pay at the pump "eliminating the ability of the marketplace to remove unsafe drivers from the road by refusing to cover them."

The whole point is that right now, in the status quo, when people don't have insurance, they still drive. And since 1 in 4 Texas adults have no insurance, if they can't drive it would decimate the workforce and the economy. You may wish that people who can't afford insurance won't get on the road, but as my father is fond of saying, if wishes were horses, beggars would ride.

A liability insurance policy is not intended to provide policyholders a means to shift to the insurer their separate, voluntarily undertaken contractual obligations. Private company D&O insurance policies generally embody this principle in a separate exclusionary provision. However, the wording of the exclusionary clause can substantially affect the scope of coverage otherwise available under the policy. In particular, the expansive reading given certain exclusionary language in recent cases suggests that a more narrowly constructed exclusion would more appropriately address the concern that the provision was originally intended to address.

I'm 54 with a driving record near perfect- 2-ten miles over speed tickets in desert outside vanhorn when my speedometer was broken! and that years ago! I'm a great, good driver! That obeys the law- until this situation with having my drivers liscense suspended because of no insurence because my drivers liscence is suspended.

I am a very considerete person that feels utter despair. My liscense is suspened so I can't buy insurence, I can't inspect the car or renew tags. I can't figure out what to do- apprently I have a ticket from over a year ago for no- insurence because my liscence was suspended so they canceled my insurence because my liscence was suspended. But a year ago- I took that ticket, got a number, sent cash to? I Don't know who or why but was told to by the court cashier-sent cashover the phone by moneygram.That seemed to fix it-but when I tried to renew my insurence this year- it seems my insurence has been canceled because my lisense was suspended because??? no insurence?

I can only think it was some 4 years ago-my car was broken by my having a tune up that was lacking badly and a tranmission repair company badly chosen. I had no car so- no insurence briefly- I had already, just called and begun paperwork for the car I was test driving, one I wanted to buy. A car that greedy seller reniged, but the car was insured for customers. I went to the court and understood it to be taken care of. I don't know. I have always had insurence EXCEPT perhaps for That once I've just mentioned when my Buick was mishandled by a mechenic and I decided to let him keep it. Mechanics used to be great in Dallas, now so large they don't seem to care about repeat business, and employees of chain shops may not have pride in work - if the company doesn't either. I have no money- no job- was a hopeful writer- a great mother- a good neighbor- a good artist- a helpfull volunteer-room mother, volunteer teaching children swimming, painting, crafts, etc. My childs at my ex's-. Ilegaly these last three months or more,I've driven when she needed me to get her from school- or shop after dark when no one can see my out of date tags. Lovely for her if I GO TO JAIL!My 84 year old mother would love for me to visit- she can't understand, nor can I. I can't go anywhere- even home- I'D HAVE TO DRIVE. Im homeless. My mother sends my ex money so I can stay there sometimes. A fugitive ! from the law. I have done nothing wrong except underestimate the viscious heartless unthinking legislators .I'm a 5th generation Texan, and I feel so abused by the many outrages I don't think I can, speak, write, live. I am a citizen- not a consumer first ! I want a citizens protection agency! So- I'll say this;throw me in jail- throw me in prision!~ But the names of each person that allows or perpretrates these outrages is going to get it back, their portait in a rogues gallery.

There is going to be one hell of a backlash with this many people, and their familes mistreated, robbed, ill- served.

And they will be replaced with concerned officials that care. Just expose the creeps for what they are- by electing, and hireing human beings with a brainthey feel responsible enough to use.The way things are its like we are attacking ourselves as a state, as a nation. I'll not edit this , but send it on. I've thought of writing this for many weeks but--- too rattled and after all I'm a fugitive from justice! Thank you Grits for Breakfast! You make me feel hopeful!

Has driving become a right? It is a privledge. Why not use the road tax to buy everyone a car? BECAUSE THAT IS STUPID! If you can not afford, or are not responcible enough to get insurance, then you do not need to be driving!

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